Written by

Paul Egan and Kathleen Gray

Detroit Free Press Lansing Bureau

LANSING — Gov. Rick Snyder is planning retroactive tax relief that will put money in the pockets of tens of thousands of Michigan workers this year, according to sources familiar with the budget Snyder will unveil Wednesday.

Details about the tax relief plan were scant Thursday, but a relatively modest tax cut or credit targeted at workers with low or moderate incomes — with a price tag in the range of $100 million — is consistent with public statements Snyder has made.

The relief will be retroactive to 2013 — which presents logistical challenges — but also makes sense in an election year for both the governor and the Legislature.

At a revenue-estimating conference this month, state officials determined Michigan has a combined $971-million surplus for the fiscal years 2013-15. Budget Director John Nixon cautioned that all but about $325 million of the surplus is “onetime money” that can’t be built into ongoing expenditures such as a tax cut.

Nixon told the Free Press on Wednesday the tax relief will be “modest,” but “targeted to where it’s needed the most,” and the administration will be creative in terms of “when do you start it, how is it put together.”

On Thursday, a source familiar with the contents of the budget confirmed Nixon’s timing reference pointed to the retroactive nature of the planned relief, which could take the form of a tax credit and would require approval from the Republican-controlled Legislature.

No details were released on exactly how many people would benefit, or what the income cap would be, but the number is expected to be at least in the tens of thousands.

(Page 2 of 2)

Tom Pinta, 72, a Ford retiree from Hamburg Township in Livingston County, said he’s wary of a long-term tax cut “because I have nothing that shows me that this surplus will be a yearly event.”

But Pinta said he’s not opposed to some tax relief.

“The people who suffered the most with Snyder’s business tax package were the people who got the earned income tax credit,” Pinta said. “If there is relief, it should go to people who most need it, and they’re at the bottom rungs of the food chain.”

Otherwise, surplus funds should go toward road and bridge repairs or to shore up education funding, he said.

Gwen Broadnax, 77, of Detroit, a retired auditor for the Michigan State Housing Development Authority, said before Snyder starts spending the surplus on tax relief for a few, he should repeal the tax he put on the pensions of senior citizens in 2011.

“If there is any surplus, the pensioners should get first dibs,” she said. “Most of that surplus came from us.”

Retroactive tax cuts are not unprecedented in Michigan, though the timing of this one means it would likely require mailing a separate check to most affected taxpayers, rather than including extra money with 2013 income tax returns the Treasury Department has already begun to process.

In his Jan. 19, 2000, State of the State address, former Gov. John Engler announced a retroactive cut in the state income tax rate from 4.3% to 4.2%, and an extension of what was then a $600 bonus exemption for children 6 and younger to include all children younger than 18.

But that tax cut, which was estimated to cost about $150 million, was made retroactive to Jan. 1, 2000, so taxpayers didn’t see the benefits of it until 2001. It appears Snyder’s more aggressive proposal would be retroactive to 2013, so money can be paid this year.

Nixon would give no details on what form the tax relief would take, except to say: “If you’re doing a modest tax cut, you want to make sure it’s targeted to areas where you really want to help people.”

Snyder’s proposal could have to compete with proposals from GOP lawmakers.

The Senate Finance Committee approved legislation this week that would cut the income tax rate from 4.25%, where it stands currently, to 3.9% by 2017. The bill still requires approval of the full Senate and House.

The cut would result in a loss of $143.6 million in the first year of the phaseout, according to an analysis of the bill, and up to $873.5 million by 2017, when the bill is fully implemented.

House Republicans introduced similar legislation Wednesday, gradually lowering the rate to 4.05% by 2016, and tying additional reductions to how much tax revenues were generated by the reduced rate.

“The governor is going to talk about something on Wednesday,” Senate Majority Leader Randy Richardville, R-Monroe, told reporters Thursday. “I think he’s built a pretty good relationship with us. We take his ideas, we think we improve on them, and he signs them.”